subscribe Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Subscribe now
A solar installation is shown at a logistics park in Durban, KwaZulu-Natal. A low-carbon future is on the horizon for Africa's commercial and industrial sectors, the writers say. Picture: SUPPLIED
A solar installation is shown at a logistics park in Durban, KwaZulu-Natal. A low-carbon future is on the horizon for Africa's commercial and industrial sectors, the writers say. Picture: SUPPLIED

Africas energy transformation, led by its commercial and industrial (C&I) sectors, unlocks vast socioeconomic opportunities.

In March, UK-based integrated energy development and investment platform Konexa closed a $18m investment to launch Nigeria’s first private renewable platform to support Nigeria Breweries’ green energy transition. The project exemplifies a revolution under way across the continent. The C&I sector’s green energy appetite is now matched by developers and investors’ hunger for renewable generation deals to meet this demand.

These complex deals require fresh approaches, especially around shifting legal and regulatory aspects. Everything must align supply, generation, distribution, off-takers, green energy certificates and carbon taxes

C&I renewables projects score from Africa’s abundance of renewable resources, spanning bioenergy, geothermal, hydropower, ocean, solar and wind. The 2023 Nairobi Declarationsignifying Africa’s common climate change goalsunderscored renewable energy’s economic, societal and climate benefits. It seeks to increase Africa’s renewable generation capacity from 56GW in 2022 to 300GW by 2030more ambitious than the global pledge to triple renewable capacity at COP28 (the UN Climate Change Conference)requiring active private sector support.

Africa’s energy landscape has immense diversity and disparities. Regarding installed capacity, SA has 45GW while Nigeria, with a similar GDP, has less than 4GW. In many regions installed capacity and grid infrastructure are so severely lacking that diesel generator sets, mini-grids or co-located generation and consumption are the norm.

Installed renewable generation capacity is equally tricky. Ember’s Global Energy Review 2023 says Africa’s wind and solar leaders are Namibia (25%), Morocco (17%) and Kenya (16%). Other places are far below the global average of 12% because of electrification prioritisation over decarbonisation. Thankfully multinational C&I companies in mining, consumer goods, brewing and technology are reducing their carbon emissions. Renewable energy demand is improving, prompting inward investment, jobs and economic activity, and new ways to meet burgeoning domestic energy needs.

Approaches to achieving Africa’s energy goals vary widely across the continent. In SA, where coal traditionally dominated, mining catalysed the government’s private power purchase agreements (PPAs) in 2021. Market liberalisation stimulated innovation in rooftop solar on commercial properties and utility-scale renewables for industrial and mining companies. Aggregators and energy traders also turbocharged market development as they arbitraged renewable power from different sources, in different areas and at different times of day, to service clients who could not bring it together themselves.

Earlier in 2024, a cluster of renewable energy projects aligned in the remarkable Koruson 2 Africa’s first traded power deal that has reached financial close. Harnessing both wind and solar energy, its aim is total capacity of 520MW, strengthening SA’s electrical grid, promising widespread socioeconomic benefits.

Transmission capacity is a major hurdle in countries with power grids built before large transfers of renewable energy were even dreamt of. Collaborative initiatives are helpful. In 2019, African energy ministers directed the AU Development Agency to spearhead the Continental Master Plan. To maximise utilisation of the continent’s lowest-cost solar, wind and hydropower resources, it calls for a seven-fold expansion of the existing cross-border transmission infrastructure from 23GW in 2023 to 167GW in 2040.

Shared resources between neighbouring countries can dramatically increase capacity. Africa’s hydropower hubs bring flexibility and storage to large solar and wind installations, boosted by strong in-country transmission networks. The 2024 International Renewable Energy Agency report says volumes of electricity traded would increase almost tenfold by 2040 — providing significant new revenue opportunities for countries, either as primary electricity exporters or wheeling hubs.

International collaboration is also increasing. Namibia and Botswana are seeking to mutually strengthen their transmission networks through private equity support and so is the Southern African Power Pool, an intergovernmental organisation for sustainable energy solutions in the Southern African Development Community.

Regulation and state monopolies still hamper many C&I renewables projects. Liberalisation is a prerequisite for creating workable renewables markets for C&I customers. Renewable energy-focused mining creates strong incentives for governments, freeing the market to take off at speed, as happened in SA.

African banks historically took seven- or eight-year views on investment-grade corporate lending, while government entities looked at 20 years, far longer than local banks’ credit systems. Private PPAs typically run on 15- to 20-year terms making some banks wary of lending to them.

Banks are increasingly comfortable with long-term debt on private PPAs 18-year terms are now commonplace. Banks are starting to consider the strength of the market over the creditworthiness of the individual offtaker. In a wheeling arrangement, if the offtaker cannot fulfil the contract, the asset can find a replacement offtaker.

Mitigation of political and regulatory change risk remains vital. Private PPAs and novel infrastructure projects such as Konexa effectively involve the private sector taking over and developing historically public assets and functions. Investment treaty protections can also assist international private investors to mitigate against political risk.

Ongoing liberalisation in favour of private PPAs is an exciting developmentIn Madagascar, Ehoala Solar Park creates a “sustainable mine” with 14,640 solar panels generating 8MW of power in phase one, focused on emission reduction, effective waste and water management, and local environmental restoration.

Innovations are also under way in financing. Zambia’s first green bond, a regional first, funds solar, wind and other renewable energy projects across its copper belt, and encourages the development of capital markets in Africa, given strong interest from investors.

The global boom in data centres and their substantial energy demands further boosts demand for green power from Africa’s C&I sector.

As Africa navigates the complexities of energy transformation, the C&I sector will drive economic growth, foster regional integration, and ensure a green sustainable future. Ambition and pragmatism will win. A bright low-carbon future for C&I is on the horizon.

• The authors, sector experts with law firm A&O Shearman in Johannesburg, recently attended the 26th Africa Energy Forum in Spain.

subscribe Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Subscribe now

Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.